On Tuesday, the Securities and Exchange Commission (SEC) published a cease-and-desist order making findings and imposing civil penalties against the respondent, Unikrn, Inc., for offering and selling cryptocurrency securities without first filing a registration statement with the agency. The order comes after the Seattle, Washington-based company made a settlement offer that the SEC accepted.
The order states that Unikrn, an online eSports gambling platform, is a privately held Delaware corporation that also wholly owns a Bermuda-based subsidiary. According to the filing, Unikrn is not registered with the SEC whatsoever.
The SEC’s findings explain that from June through October 2017, Unikrn conducted a bi-phase initial coin offering (ICO) of its digital token, UnikoinGold (UKG). The company allegedly claimed through emails to investors and a published white paper that UKG tokens would allow users to bet on both professional eSports and video game matches, and over time, access more features like bingo, casino games, and eSports tournaments. It also supposedly promised that it would “facilitate a secondary trading market for the tokens and that its efforts to increase the usages for the UKG token would increase the demand for and in turn, the value of the tokens.”
The order states that in October 2017, Unikrn’s Bermuda subsidiary filed a Form D with the SEC “incorrectly claiming,” that its pre-sale ICO was exempt from registration. Through the sale of its digital tokens, the company ultimately raised about $31 million; however, because Unikrn failed to file a registration statement it violated sections of the Securities Act of 1933, the order found.
The settlement requires Unikrn to permanently disable UKG and publish notice of the SEC action on its website and social media accounts. Furthermore, the company must pay a civil penalty of $6.1 million. The penalty will be distributed to investors for losses resulting from the stated violations through a “fair fund,” overseen by an SEC-appointed administrator.
Finally, according to the SEC’s accompanying press release, the Washington State Department of Financial Institution also finalized a settlement with Unikrn for state registration violations stemming from its ICO.
The SEC is represented by its own attorneys, and Unikrn by Ifrah Law PLLC.